Electricity Regulation Act: NERSA Consults on Cost-of-Supply Framework and Pricing Methodology

Posted 10 November 2026 Written by Acts Online
Category Minerals & Energy

Brought to you by SA Legal Academy: In terms of section 15(1)(aA) of the Electricity Regulation Act, No. 4 of 2006, the National Energy Regulator of South Africa (NERSA) has issued a consultation paper detailing proposals to align the prevailing cost-of-supply framework and tariff pricing methodology with recent statutory revisions.

Sub-section 15(1)(aA) was inserted into the principal statute by the Electricity Regulation Amendment Act, 2024, the majority of which came into operation on 1 January 2025. The amendment requires NERSA to allow a licensed entity a reasonable return proportionate to the risk of the licensed activity, mandating an explicit relationship between the return allowed, the capital invested in the activity, and the associated risk profile.

The review takes into account structural electricity supply industry reforms as well as the prevailing financial and operational condition of municipal electricity distributors. Technical frameworks and proposed pricing models to operationalise section 15(1)(aA) are set out in Annexure A of the consultation paper.

Key procedural deadlines and dates include:

  • 7 December 2026: Deadline for submission of written representations and stakeholder input to NERSA.
  • 14 December 2026: Scheduled NERSA stakeholder consultation workshop.

What this means for you, your business, or your clients

  • For yourself: Regulatory and energy law practitioners advising licensees must review the pricing methodology proposals in Annexure A to track changing rate-of-return criteria ahead of formal tariff applications.
  • For your business: Large power users and corporate entities must account for potential adjustments to tariff structures and cost-reflective tariffs in their medium-term energy expenditure forecasts.
  • For your clients: Licensed distributors, municipal electricity departments, and independent power producers must calculate their asset base and operational risk metrics to evaluate whether NERSA’s proposed return-on-capital framework provides adequate revenue sufficiency.

Originally published at https://legalacademy.co.za/news/read/electricity-nersa-calls-for-input-on-cost-of-supply-framework-and-pricing-methodology-proposals

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